28 May 2010 15:47
This announcement is not a prospectus. Investors should not subscribe for or purchase any transferable securities referred to in this announcement except on the basis of information in the prospectus expected to be published by AVANGARDCO INVESTMENTS PUBLIC LIMITED in due course in connection with the proposed admission of GDRs representing shares of AVANGARDCO INVESTMENTS PUBLIC LIMITED to the Official List of the Financial Services Authority and to trading on the London Stock Exchange plc's regulated market for listed securities (the "Prospectus"). Copies of the Prospectus will, following publication, be available from the Company's registered office (16-18 Zinas Kanther Street, 3035 Limassol, Cyprus).
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR FROM THE RUSSIAN FEDERATION, UKRAINE, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION
This communication is for distribution only to persons who (i) are outside the United Kingdom and qualified to receive it in the relevant jurisdiction, or (ii) have professional experience in matters relating to investments falling within Article 19(5) of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), or (iii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc") of the Order (all such persons together being referred to as "relevant persons"). This communication is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons.
This announcement and the information contained herein is only directed at persons in member states of the European Economic Area who are "qualified investors" within the meaning of Article (2)(1)(e) of the Prospectus Directive (Directive 2003/71/EC).
May 28, 2010 For Immediate Release
AVANGARDCO INVESTMENTS PUBLIC LIMITED
EXERCISE OF OVER-ALLOTMENT OPTION
KYIV, UKRAINE - AVANGARDCO INVESTMENTS PUBLIC LIMITED (the "Company" or "Avangard"), one of the leading agro-industrial companies in Ukraine, focusing on the production of shell eggs and egg products, today announces that it has received notice from Troika Dialog (UK) Limited, acting as Stabilising Manager, that it has determined to exercise the over-allotment option in respect of an additional 137,185 Shares (corresponding to 1,371,850 GDRs).
Following the exercise of the over-allotment option, the global offering comprises of 1,387,185 new ordinary shares in the form of GDRs offered by the Company, corresponding to a total offer size of US$208 million. The Offering represents approximately 21.7% per cent of the Company's issued ordinary shares after the exercise of the over-allotment option.
Avangard's GDRs trade on the London Stock Exchange under the ticker symbol AVGR.
Troika Dialog acted as Global Co-ordinator, Lead Manager and Bookrunner for the Offering and NCB Stockbrokers Limited as Co-Lead Manager.
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For further information please contact:
| Financial Dynamics London Ben Foster Marc Cohen
+44 20 7831 3113
| Financial Dynamics Moscow Leonid Solovyev Oleg Leonov
+7 495 795 06 23
|
Notes to Editors
Information of Avangard
The Company is a holding company for a group (the "Group") that is one of the leading agro-industrial companies in Ukraine, focusing on the production of shell eggs and egg products. The Company is the number one producer of shell eggs and dry egg products in Ukraine with a market share of approximately 23% (including 39% of industrially produced shell eggs) and 52% respectively in 2009. As of 31 December 2009, Avangard's flock consists of approximately 16,121 thousand birds. Avangard's production facilities are located across 14 regions in Ukraine and also in the Autonomous Republic of Crimea. In 2009 Avangard exported its shell eggs and egg products to 16 countries mainly in the Middle East and Asia.
Investment highlights
·; Number one position in the large and growing Ukrainian market of shell eggs and dry egg products.
·; Vertical integration ensuring reduced costs and enhanced quality control.
·; Highly advanced technology.
·; High biosecurity standards.
·; Experienced management team.
·; Strong financial performance - secured and effectively allocated financial resources to meet the need of expanded business.
Operations
Avangard operates vertically integrated shell egg production facilities comprising 19 farms for laying hens. These farms are serviced by three breeder farms, nine farms for growing young laying hens, six fodder mills and three long-term egg storage facilities. This level of vertical integration allows Avangard to reduce production costs, better coordinate and control the various stages of production and improve the overall quality of its products.
Avangard also operates facilities for the production of egg products at its Imperovo plant located in the Ivano-Frankivsk region of Ukraine, which Management believes to be one of the most technologically advanced egg processing facilities in the CIS. Imperovo has a design processing capacity of 3 million shell eggs per day. Avangard intends to gradually increase Imperovo's processing capacity to 10 million shell eggs per day. Currently Avangard produces only dry egg products.
Avangard's shell eggs and egg products are either exported or sold wholesale to customers.
Competitive strengths
Leading market position in a large and growing market for shell eggs and egg products
Avangard is one of the leading producers of shell eggs and egg products in Ukraine, which in 2009 had a market share of approximately 23% of all shell eggs (including 39% of industrially produced shell eggs) and approximately 52% of all dry egg products produced in Ukraine. The annual industrial production market for shell eggs and egg products in Ukraine is expected to continue to grow in the short to medium term, as a result of declining alternative sources of supply (such as household production) and, to a lesser degree, potential further increases in consumer demand. Management believes that Avangard's established market position and reputation for quality enhances its bargaining position with customers and its size helps it to realise production and marketing economies of scale. Management believes that Avangard is in a strong position to strengthen its market position due to an expected decline of small industrial and household producers and enjoys a competitive advantage over potential new entrants to the market due to the significant time and investment that would be required for a new entrant to develop vertical integration on a similar scale.
Countrywide coverage and diversified sales structure
Avangard's production facilities are located in 14 regions of Ukraine and also in the Autonomous Republic of Crimea. Avangard believes that its countrywide coverage gives it a competitive advantage and enables it to achieve better pricing and margins. Avangard sells its products through a variety of channels, including exports and sales to domestic wholesalers, of which major supermarket chains have become an increasingly important distribution channel. Avangard's diversified sales structure enables it to manage costs and increase operational efficiency.
Potential for further export growth
Avangard is well positioned to sell increasing amounts of both shell eggs and egg products into export markets. In 2009, Avangard exported its shell eggs and egg products to 16 countries. Avangard is liaising with Ukrainian state authorities in order for it to be able to sell its egg products into the EU. Management believes that Avangard may benefit from lower production costs relative to EU producers. The location of some of Avangard's facilities, including the Imperovo egg processing plant in western Ukraine, means that it is geographically well positioned to export into the EU and that transportation costs would be less than for some of its competitors.
Vertical integration reduces costs and enhances quality control
Other than breeder flock, Avangard owns and operates each of the key stages of egg production processes, from the production of hatching eggs (from which laying flock is hatched) to the production of shell eggs. To support its egg production operations, in 2009 Avangard internally produced 75% of its animal feed (sourcing the remainder of its animal feed requirements and all of the feed grains for the production of the animal feed from third parties). Management believes that vertical integration reduces Avangard's dependence on suppliers and this is particularly important in developing markets, such as Ukraine, to avoid supply interruption and price volatility. Vertical integration also creates synergies in a number of other areas, as well as stronger control over costs. In addition, vertical integration also allows Avangard to maintain strict biosecurity and to control the quality of its inputs and the resulting quality and consistency of its products through to the point of sale.
Modern technology
Avangard employs advanced technologies at its various production facilities, including in relation to its breeder farms, farms for growing young laying hens, farms for laying hens and egg processing facilities. Avangard's production process is largely automated, which ensures and promotes consistently high-quality products in a cost-effective manner. Avangard sources the equipment for its egg production facilities both domestically and from leading European suppliers and the benefits of its modern equipment and advanced technologies are reflected in Avangard's favourable performance indicators, production costs and the high quality of Avangard's shell eggs and egg products.
High biosecurity standards
Avangard employs strict biosecurity measures throughout its entire production process, from breeding to laying, as well as its animal feed production facilities, in order to minimise the risk of contamination and disease at its egg production facilities. These measures include, amongst others, keeping chickens within indoor production facilities, employing multi-site farming, disinfecting vehicles entering production areas and regularly monitoring the health of chickens and employees. Avangard's biosecurity system complies with Ukrainian legislation and is in line with international best practices.
Strategy
Avangard's overall objective is to expand its position as one of the leading agro-industrial companies in Ukraine, while strengthening its position as the leading Ukrainian egg production and egg processing company and exporter of shell eggs and egg products. The key elements of its strategy include:
·; Increasing market share in Ukraine.
·; Expanding egg production capacity.
·; Expanding export of eggs end egg products
·; Continuously focusing on the efficiency of production process
·; Continuing the development of its customer base.
·; Constructing biogas production facilities.
·; Enhancing the value of the regional brands and introducing a national brand for its shell eggs.
·; Expanding into neighbouring countries.
2009 Financial results
Avangard has delivered a strong financial performance in recent years despite the challenging economic conditions. The Company generated revenues of USD $319.855 million (2008: USD $302.292 million), EBITDA of USD $152.092 million (2008: USD $113.738 million).
In 2009 the Company decreased its Cost of Goods ("COG") by 5%, from 77% to 69% of sales revenue, as compared to 2008.
Avangard has a very strong balance sheet with net debt of USD $102.571 million, equating to 12% of total assets and 0.7x EBITDA in 2009.
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Troika Dialog are acting exclusively for the Company and no one else in connection with the Offering and will not regard any other person (whether or not a recipient of this announcement) as their respective clients and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Troika Dialog nor for giving advice in relation to the Offering, the contents of this announcement or any transaction or arrangement referred to herein.
This announcement does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, securities to any person in the United Kingdom or any other European Economic Area state, Australia, Canada, Japan, Ukraine, the Russian Federation, the United States or in any other jurisdiction. The securities referred to herein may not be offered or sold in the United States absent registration under the US Securities Act of 1933, as amended (the "Securities Act") or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Subject to certain exceptions, the securities referred to herein may not be offered or sold in the United Kingdom or any other European Economic Area state, Australia, Canada, Japan, Ukraine, the Russian Federation, the United States or to, or for the account or benefit of, any national, resident or citizen of the United Kingdom or any other European Economic Area state, Australia, Canada, Japan, Ukraine, the Russian Federation or the United States. The offer and sale of the securities referred to herein has not been and will not be registered under the Securities Act or under the applicable securities laws of Australia, Canada, Japan, Ukraine or the Russian Federation. There will be no public offer of the securities in the United States.
Neither the Financial Services Authority nor any other listing authority or exchange has, at the date of the announcement, approved the proposed listing of GDRs in the Company.
Information in this announcement or any of the documents relating to the Global Offering cannot be relied upon as a guide to future performance. The price and value of securities may go up as well as down. Persons needing advice should contact a professional adviser.
This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward looking statements can be identified by the use of forward looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include matters that are not historical facts and include statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the outlook on the industry.
By their nature, forward looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward looking statements including, without limitation, the factors to be described in the risk factors section of the Prospectus, and the factors to be described in the financial review and prospects section of the Prospectus when it is published.
Forward looking statements may and often do differ materially from actual results. Any forward looking statements in this announcement reflect the Company's view with respect to future events as at the date of this announcement and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Save as required by law or by the Listing Rules of the Financial Services Authority, the Company undertakes no obligation publicly to release the results of any revisions to any forward looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.